Companies grow by entering new markets, addressing current customer needs, and creating products and services, often with existing business models. In the process, they may overlook one critical driver: purpose.
Professor and Faculty Director Thomas Malnight of the Business Transformation Initiative at IMD in Lausanne, Switzerland, discussed purpose and strategy during a Salesforce-sponsored Harvard Business Review webinar.
During the webinar, he explained why purpose matters and how companies can incorporate purpose into their strategy. We capture those insights and invite you to watch the full webinar for more context.
Why purpose matters
Purpose drives growth. Professor Malnight believes high-growth companies have a few things in common. They’re proactive and take specific actions to lead, guide, and shape their future. High-growth companies have a purpose beyond profit. He shared research that shows high-growth companies focus on outside-in thinking, innovation, developing the ecosystem, and driving toward purpose. In doing so, they have made three key shifts:
From fighting for market share in mature industries to redefining the playing field
From focusing on efficiency in traditional activities to reshaping their value proposition
From leadership that manages operations to leadership that aligns, engages, and empowers stakeholders
How to incorporate purpose into corporate strategy
To inject purpose into your strategy, look beyond profit. “Do not give up your core,” warns Malnight. Companies are not only defined by their products and services or by industry boundaries. Successful companies help their customers solve problems. They evaluate their purpose and communities, move from transactions to relationships, and motivate and align stakeholders. Ultimately, they choose purpose-shaping decisions and actions. It’s a major mindset shift.
For companies ready for this journey, here are a few key questions:
Where have we come from?
How did we get here?
What makes us unique to stakeholders?
How does our DNA bring about future opportunities we believe in?
How NOT to incorporate purpose
Incorporating purpose is not easy. Leaders often fail by doing these three things:
Separate purpose from strategy. When companies do this, they have one process focused on what they say and another on what they do. This type of purpose does not move the needle and is merely “words on the wall.”
Focus purpose only in the long term. The role of purpose is to refocus on the core. Short- and long-term goals should not be separated. Companies must free up short-term time and resources to prioritize purpose today.
Hire advertising firms or expect top executives to figure it out. Often, the best ideas come from the people who already work at the company. This is why leaders should listen to their employees. No external agency will have the same insight.
Keeping purpose at the core
Traditional businesses are internally focused, slow to adopt change, suffer from reactive initiative overload, and tend to protect the core — and the past. But purpose-driven businesses continue to redefine their value proposition, work to stay ahead, and leverage their core while focusing on impact as a source of growth. To do this, they continue to ask themselves questions about how purpose impacts their business (as opposed to whether or not it does):
How does purpose contribute to increasing our company’s growth and profitability?
How does purpose influence strategic decisions and investment choices?
How does purpose shape our core value proposition?
How does purpose affect how we build and manage our capabilities?
How can purpose be on the agenda of the leadership team every time they meet?
Purpose supports your value
Purpose, values, behavior, and culture are all intertwined. Professor Malnight explains how purpose shapes values: Values translate into acceptable behavior, and over time, behavior becomes culture. “It’s critical to ask how your purpose will influence what you expect of your employees,” explains Malnight. “What behavior is acceptable? This must be reflected in values and culture.” And culture does not change overnight.
By putting purpose at the core of strategy, companies redefine the playing field, driving more value for stakeholders. They can then overcome the inevitable challenges of stagnant growth and declining profits. Also important, they can unify their organization, motivate stakeholders, and create a broader impact. “It’s not about reducing costs; it’s about creating value together,” explains Malnight.
How to get started
Start with employees, and do so by giving them opportunities to live their values. Workplace volunteering can accomplish this. Giving back is not only one of the quickest ways to build a strong culture — one that reflects positive corporate values — it also improves employee recruitment, satisfaction, and retention.
To learn how you can incorporate purpose into your company, check out Salesforce.org Philanthropy Cloud to build giving back into your daily work. Or watch our webinar Doing Good Is Good for Business for quantitative evidence of how purpose improves business outcomes.